UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported):  March 12, 2015

 

Reading International, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Registrant's telephone number, including area code:  (213) 235-2240

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

 

 

 

 

Item 2.02.  Results of Operations and Financial Condition

 

On March 12, 2015, Reading International, Inc. issued a press release announcing information regarding its results of operations and financial condition for the quarter and year ended December 31, 2014, a copy of which is attached as Exhibit 99.1.

 

 

Item 9.01.  Financial Statements and Exhibits.

 

99.1Press release issued by Reading International, Inc. pertaining to its results of operations and financial condition for the quarter and year ended December 31, 2014.

 

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

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INDEX TO EXHIBITS

 

 

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Reading International Announces

4th Quarter and Full Year 2014 Results

EBITDA(1) for the 2014 Quarter at $9.1 million compared to $10.9 million in 2013,  down $1.8 million or 16.5% over 2013

EBITDA(1)  for the 2014 Twelve Months at $40.4 million compared to $39.2 million in 2013, up $1.2 million or 3.1% over 2013

Net Income for the 2014 Quarter at $17.2 million compared to $3.2 million in 2013, up $14.0 million or 437.5% over 2013

Net Income for the 2014 Twelve Months at $25.7 million compared to $9.0 million in 2013, up $16.7 million or 185.6% over 2013

 

 

Los Angeles, California, - (BUSINESS WIRE) March 12, 2015 - Reading International, Inc. (NASDAQ: RDI) announced today results for its quarter and twelve months ended December 31, 2014.

2014 Highlights

 

 

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Fourth Quarter 2014 Discussion

Revenue from operations decreased from $63.5 million in the 2013 Quarter to $61.7 million in the same Quarter in 2014, a decrease of $1.8 million or 2.8%. 

Our cinema segment revenue decreased by $1.1 million or 1.9% in the 2014 Quarter compared to the same period in 2013.  The 2014 Quarter decrease was primarily due to a $1.9 million or 9.0%  decrease in Australian cinema revenue, primarily due to the strengthening of the US dollar against the Australian dollar in 2014 Quarter (see below).    Offsetting part of this decrease was a $694,000 increase in cinema revenue from our U.S. cinemas. 

The top three grossing films for the 2014 Quarter in our worldwide cinema circuit were “Hunger Games: Mockingjay, Part 1,” “The Hobbit: Battle of the Five Armies,” and “Gone Girl.”  These three films accounted for approximately 25.0% of our 2014 Quarter cinema box office revenue. The top three grossing films for the 2013 Quarter in our worldwide cinema circuit were “Hunger Games: Catching Fire,” “Gravity,” and “Thor: The Dark World.”  These three films accounted for approximately 28.9% of our 2013 Quarter cinema box office revenue.   

Our real estate segment revenue for the 2014  Quarter decreased by $740,000 or 11.1%, primarily due to decreases in the value of the Australian and New Zealand dollar compared to the U.S. dollar for the 2014 Quarter compared to the same period in 2013 Quarter (see below).

Operating expense was 78.8% of revenue for both of the 2014 and the 2013 Quarters.   

General and administrative expense decreased by $551,000 or 11.6%  for the 2014 Quarter compared to the 2013  Quarter.  The decrease was primarily related to a  decrease in salary and benefits over the 2013 quarter.

For our statement of operations, the Australian quarterly average exchange rates decreased by 7.4% and the New Zealand quarterly average exchange rates decreased by 7.1% from the 2013 Quarter, both of which had an impact on the individual components of our income statement.

Driven by the above factors, our operating income for the 2014 Quarter increased by $114,000 or 2.4%  to an operating income of $4.9 million compared to an operating income of $4.8 million in the same quarter last year.

Net interest expense increased by $549,000 or 28.7%  for the 2014 Quarter compared to the 2013 Quarter.  The interest expense was higher in 2014 due to an decrease in the fair value of our interest rate swap liabilities in the 2013  Quarter compared to the 2014 Quarter. 

For the 2014 Quarter, we recorded $198,000 in other income, which primarily consisted of income from unconsolidated entities.  For the 2013 Quarter, we recorded $2.1 million in other income, which primarily consisted of a $1.4 million gain on the acquisition and settlement of a cinema; $365,000 of income from unconsolidated entities; and the receipt of insurance proceeds from our business interruption claim for the temporary closure of our cinema in Christchurch, New Zealand.

           For the 2014 Quarter, the income tax benefit was $14.5 million in 2014 compared to a $1.8 million expense in 2013 and was due to the reversal of the valuation allowance in the U.S.   

As a result, we reported a net income of $17.2 million for the 2014 Quarter compared to a net income of $3.2 million in the 2013 Quarter, an increase of $14.0 million or 437.5%. 

Our EBITDA(1) at $9.1 million for the 2014 Quarter was $1.8 million or 16.5% lower than the EBITDA(1) for the 2013 Quarter of $10.9 million. There were no significant adjustments to EBITDA in either the 2014 or the 2013 Quarters. 

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Twelve Months 2014 Summary

Revenue from operations decreased from $258.2 million during the 2013 Twelve Months to $254.7 million in the 2014 Twelve Months, a  $3.5 million or a 1.4% decrease. 

Cinema segment revenue decreased $1.5 million or 0.7% driven by a  revenue decrease in the U.S. of $602,000 or 0.5%. This decrease was partially driven by a reduction in box office revenue of $1.5 million, in turn driven by an 82,000 admit reduction, together with a 1.0% reduction in average ticket price, offset by increased concession and café revenues of approximately $524,000. This decrease in cinema segment revenue was also due to a $2.9 million or 3.2% decrease in Australian revenue, which in turn was primarily due to the strengthening of the US dollar against the Australian dollar in 2014 (see below).  Australian local currency box office was consistent with 2013, with a decrease in average ticket price of 4.5% being offset by increased ticket sales of 4.9%. Excluding currency effects, concession revenue was up 7.0%, reflecting increased admission volume and increased spend per admit. The Cinema segment revenue decrease in the US and Australia was partially offset by a revenue increase in New Zealand of $2.0 million or 9.1%. In New Zealand, attendance increased by 88,000 or 5.1%. The majority of this increase was achieved through the opening of our Dunedin cinema. The attendance increase more than offset a New Zealand local currency reduction in average ticket price of 1.8%. New Zealand concession revenue increased by $879,000 due to the combined positive effect of increased admission volumes, improved spend per patron yield, and a  positive U.S. dollar to N.Z. dollar exchange rate movement (refer below).

The top three grossing films for the 2014 Twelve Months were “Hunger Games: Mockingjay, Part 1”,  “Guardians of the Galaxy,” and “Transformers: Age of Extinction” These three films accounted for approximately 8.0% of our 2014 Twelve Months cinema box office revenue. The top three grossing films for the 2013 Twelve Months in our worldwide cinema circuit were “Iron Man 3,” “Hunger Games: Catching Fire,” and “Despicable Me 2.”  These three films accounted for approximately 9.4% of our 2013 Twelve Months cinema box office revenue.

Our real estate segment revenue decreased by $2.0 million or 8.0% during the 2014 Twelve Months compared to the same period last year.  The decrease in real estate revenue was primarily related to the closure of our Courtenay Central parking structure in July 2013 because of the 2013 earthquakes in Wellington, New Zealand.  The Courtenay Central parking structure reopened in November 2014. In local currency the Australian real estate segment revenue improved by 4.1%. This was offset by decreases in the value of the Australian dollar compared to the U.S. dollar for the 2014 Twelve Months compared to the same period in 2013 (see below).

Operating expense was 77.8% of revenue in the 2014 Twelve Months compared to the 79.0% in the 2013 Twelve Months.    The reduction in operating expense percentage was achieved as a result of a significant reduction in operating expense, especially in Australia, as a result of, digital marketing strategies reducing costs, and lower real estate expense associated with our Burwood property. Additionally, changes in the value of the Australian and New Zealand dollars compared to the U.S. dollar (see below), affected both the Australian and New Zealand operating expense.

Depreciation expense increased for the 2014 Twelve Months by $271,000 or 1.8% compared to the same period in 2013 primarily due to digital projection assets receiving their first full quarter of depreciation in 2014 in Australia and New Zealand.

General and administrative expense increased by $849,000 or 4.7% for the 2014 Twelve Months compared to the 2013 Twelve Months.  This increase in general and administrative expense during the 2014 Twelve Months was primarily due to increased salary and benefit costs.  

For our statement of operations, the Australian 2014 Twelve Month average exchange rates decreased by 6.8% and the New Zealand 2014 Twelve Month average exchange rates increased by 1.2% from the 2013 Twelve Months, both of which had an impact on the individual components of our income statement.

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Driven by the above factors, our operating income for the 2014 Twelve Months increased by $1.3 million or 6.2% to $22.2 million compared to $20.9 million in the same period last year.

Net interest expense decreased by $1.0 million or 10.0%  for the 2014 Twelve Months compared to the 2013 Twelve Months. The decrease in interest expense during 2014 resulted from our ability to refinance certain debt obligations at favorable rates in comparison to the existing rates. Additionally, our interest expense was lower in 2014 due to a decrease in the fair value of our interest rate swap liabilities in the 2014 Twelve Months.  

For the 2014 Twelve Months, we recorded $2.7 million in other income which consisted of $1.0 million of income from unconsolidated entities and the receipt of insurance proceeds from our business interruption claim for the temporary closure of our Courtenay Central parking structure in Wellington, New Zealand.  For the 2013 Twelve Months, we recorded $3.2 million in other income which was primarily related to a $1.4 million gain on the acquisition and settlement of a cinema; $1.4 million of income from unconsolidated entities; and the receipt of insurance proceeds from our business interruption claim for the temporary closure of our cinema in Christchurch, New Zealand.  

For the 2014 Twelve Months, we recognized an income tax benefit of $9.8 million in 2014 compared to a $4.9 million expense in 2013 and was due to the reversal of the valuation allowance in the U.S.   

As a result of the above, we reported a net income of $25.7 million for the 2014 Twelve Months compared to a net income of $9.0 million in 2013, driven primarily by the $14.7 million decrease in income tax expense due to the reversal of the valuation allowance in the U.S.

Our EBITDA(1) at $40.4 million for the 2014 Twelve Months was $1.2 million or 3.1% higher than the EBITDA(1) for the 2013 Twelve Months of $39.2 million. There were no adjustments to EBITDA in either the 2014 or the 2013 Twelve Months.  

Balance Sheet and Liquidity

Our total assets at December 31, 2014 were $401.6 million compared to $386.8 million at December 31, 2013.  The currency exchange rates for Australia and New Zealand as of December 31, 2014 were $0.8173 and $0.7796, respectively, and as of December 31, 2013, these rates were $0.8929 and $0.8229, respectively.  As a result, currency had a negative effect on the balance sheet at December 31, 2014 compared to December 31, 2013.

On November 28, 2014, we refinanced our Bank of America revolver and increased the borrowing limits from $35.0 million to $55.0 million with no loan amortization required during the term. The loan has a 5-year term, maturing on December 1, 2019 and an interest rate at Libor plus applicable margin rate (ranging from 3.0% to 2.5%) adjusted quarterly.

On June 27, 2014, we refinanced our existing three-tiered credit facility with NAB.  It is comprised of (1) the Bank Bill Discount Facility with a facility limit of AUS$61.3 million, an interest rate of 2.35% above the BBSY, and amortization at AUS$2.0 million per year; (2) the Bill Discount Facility – Revolving with a facility limit of AUS$10.0 million and an interest rate of 1.50% above the BBSY on any undrawn portion and (3) the Bank Guarantee Facility with a facility limit of AUS$5.0 million.  All three have a due date of June 30, 2019. 

On June 26, 2014, our subsidiary Sutton Hill Properties, LLC entered into an agreement with Sovereign Bank, refinancing the current loan on the Cinemas 1,2,3 property in Manhattan and providing an additional $6.0 million for the acquisition of air rights to add additional density to any redevelopment of the property. We replaced a maturing term loan of $15.0 million with a new loan that has a 2-year term, payable interest only, commencing June 27, 2014, all principal and unpaid interest due and payable on maturity.

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Our cash position at December 31, 2014 was $50.2 million including $30.4 million in the U.S., $12.1 million in Australia, and $7.7 million in New Zealand.  As part of our main credit facilities in Australia, New Zealand and the U.S., we are subject to certain debt covenants that limit the transfer or use of cash outside of the various regional subsidiaries in which the cash is held.  As such, at December 31, 2014, we have approximately $26.2 million of cash worldwide that is not restricted by loan covenants.

At December 31, 2014, $25.3 million is available under Bank of America revolver in the US; $9.4 million (NZ$12.0 million) is available under our Westpac New Zealand Corporate Credit facility; $5.0 million is available under our BofA Revolver in the U.S. and $6.0 million is available under our Sovereign Line of Credit in the U.S. to be used for the acquisition of air rights as part of the redevelopment of our Cinemas 1,2,3 property.  Accordingly, we believe that we have sufficient borrowing capacity under our various credit facilities, together with our $50.2 million cash balance, to meet our anticipated short-term working capital requirements.

Our working capital at December 31, 2014 was a negative $8.8 million compared to a negative $71.8 million at December 31, 2013.  The improvement in working capital resulted primarily from our Australian NAB Corporate Term Loan and our U.S. Cinemas 1,2,3 Term Loan being  refinanced and now being treated as long-term liabilities in 2014.    We are in the process of renegotiating the New Zealand Corporate Credit facility and the Union Square term loan with our current lenders.  If the current debt is excluded from working capital, our resulting working capital would be positive.

Stockholders’ equity was $132.3 million at December 31, 2014 compared to $121.7 million at December 31, 2013,  an increase of $10.6 million or 8.7%, primarily related to a  $25.7 million decrease in accumulated deficit resulting from our 2014 net income offset by a $13.5 million decrease in accumulated other comprehensive income mainly due to currency movements.

 

 

 

Subsequent Events

Los Angeles Doheny Condominium

As part of a rationalization of our office space, in early December 2014 we listed our Los Angeles Doheny Condominium for sale.  At December 31, 2014, this property was classified as an Asset Held for Sale.  On February 25, 2015, we consummated a sale contract for this property for a sale price of $3.0 million.

 

Union Square Property

On March 10, 2015, the New York Landmark Preservation Society  approved our design to the landmarked Union Square property allowing a new glass dome on the roof plus additional entrances, windows and signage adding over 23,000 square feet of rentable space.

 

 

 

(1)The Company defines EBITDA as net income (loss) before net interest expense, income tax benefit, depreciation, and amortization.  The company defines adjusted EBITDA as EBITDA adjusted for unusual or infrequent events or items that are of a non-cash nature.  EBITDA and adjusted EBITDA are presented solely as supplemental disclosures as we believe they are relevant and useful measures to compare operating results among our properties and competitors, as well as measurement tools for the evaluation of operating personnel.  EBITDA and adjusted EBITDA are not measures of financial performance under the promulgations of generally accepted accounting principles (“GAAP”).  EBITDA and adjusted EBITDA should not be considered in isolation from, or as substitutes for, net loss, operating loss or cash flows from operations determined in accordance with GAAP.  Finally, EBITDA and adjusted EBITDA are not calculated in the same manner by all companies and accordingly, may not be appropriate measures for comparing performance among different companies.  See the “Supplemental Data” table attached for a reconciliation of EBITDA to net income (loss).

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About Reading International, Inc.

Reading International (http://www.readingrdi.com) is in the business of owning and operating cinemas and developing, owning and operating real estate assets.  Our business consists primarily of:

 

Reading manages its worldwide business under various different brands:

 

 

 

 

 

Forward-Looking Statements

Our statements in this press release contain a variety of forward-looking statements as defined by the Securities Litigation Reform Act of 1995.  Forward-looking statements reflect only our expectations regarding future events and operating performance and necessarily speak only as of the date the information was prepared.  No guarantees can be given that our expectation will in fact be realized, in whole or in part.  You can recognize these statements by our use of words such as, by way of example, “may,” “will,” “expect,” “believe,” and “anticipate” or other similar terminology.

These forward-looking statements reflect our expectation after having considered a variety of risks and uncertainties.  However, they are necessarily the product of internal discussion and do not necessarily completely reflect the views of individual members of our Board of Directors or of our management team.  Individual Board members and individual members of our management team may have different views as to the risks and uncertainties involved, and may have different views as to future events or our operating performance.

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Among the factors that could cause actual results to differ materially from those expressed in or underlying our forward-looking statements are the following:

The above list is not necessarily exhaustive, as business is by definition unpredictable and risky, and subject to influence by numerous factors outside of our control such as changes in government regulation or policy, competition, interest rates, supply, technological innovation, changes in consumer taste and fancy, weather, and the extent to which consumers in our markets have the economic wherewithal to spend money on beyond-the-home entertainment.

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Given the variety and unpredictability of the factors that will ultimately influence our businesses and our results of operation, no guarantees can be given that any of our forward-looking statements will ultimately prove to be correct.  Actual results will undoubtedly vary and there is no guarantee as to how our securities will perform either when considered in isolation or when compared to other securities or investment opportunities.

Finally, we undertake no obligation to publicly update or to revise any of our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law.  Accordingly, you should always note the date to which our forward-looking statements speak.

Additionally, certain of the presentations included in this press release may contain “pro forma” information or “non-US GAAP financial measures.”  In such case, a reconciliation of this information to our US GAAP financial statements will be made available in connection with such statements.

For more information, contact:

Andrzej Matyczynski, Chief Financial Officer

Reading International, Inc.  (213) 235-2240

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Reading International, Inc. and Subsidiaries

Supplemental Data

Reconciliation of EBITDA to Net Income

(dollars in thousands, except per share amounts)

 

 

*EBITDA presented above is net income adjusted for interest expense (net of interest income), income tax expense, depreciation and amortization expense, and an adjustment for discontinued operations (this includes interest expense and depreciation and amortization for the discontinued operations).

Reconciliation of EBITDA to the net income is presented below:

 

 

 

 

Reading International, Inc. and Subsidiaries

Consolidated Statements of Operations for the Three Years Ended December 31, 2014

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(U.S. dollars in thousands)

 

 

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Reading International, Inc. and Subsidiaries

Consolidated Balance Sheets as of December 31, 2014 and 2013

(U.S. dollars in thousands)

 

 

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